August 29, 2011

A Maui (Hawai’i Second Circuit) Court has denied a Motion to Dismiss filed by US Bank as Trustee of a securitized mortgage loan trust which Motion sought to dismiss, with prejudice, the homeowner’s Complaint challenging a 2008 nonjudicial foreclosure and subsequent purported conveyance of the property. The Complaint alleges that the foreclosure and purported post-sale conveyance did not comply with Hawaii Revised Statute 667-5, which pertains to nonjudicial foreclosure proceedings. The homeowner is represented by Jeff Barnes, Esq. and local Hawai’i counsel Ronald Grant, Esq. Mr. Barnes was admitted pro hac vice at the hearing and argued for the homeowner.

The mortgage was originated by the now-bankrupt New Century Mortgage Corporation, whose subsidiary Home 123 previously had its license to do business revoked by the State of California and its registered agent’s authority rescinded by the State of Hawai’i as well. MERS generated the “Notice of Mortgagee’s Foreclosure” which identified MERS “solely as nominee” for an unidentified entity and with a mailing address of “c/o HomeEq Servicing Corporation” with a post office box in a suburb of Los Angeles, California.

There were never any documents provided to the homeowner identifying who MERS was allegedly acting on behalf of; no evidence of any authority from the United States Bankruptcy Court having jurisdiction over the New Century bankruptcy proceeding permitting the mortgage loan to be divested as an asset from the estate or to permit MERS to conduct a nonjudicial foreclosure; and no documents providing MERS with any authority to either conduct the sale or convey the property post-sale.

The Complaint alleges that the Notices of Sale failed to comply with the literal terms of Haw.Rev.Stat. sec. 667-5 (which requires any nonjudicial sale scheduled pursuant to the Statute to be by a party with authority by the power to act), and that MERS failed to demonstrate any such power as required by the Statute both as to noticing the sale and also thereafter not only conducting the sale but allegedly conveying the property in late 2008 to USBank “as trustee” for the securitized mortgage loan trust which closed in 2006. The Complaint claims that the sale and subsequent “conveyance” were thus null, void, and of no legal effect.

The Court found that the Defendant (USBank as Trustee) failed to meet its burden for dismissal. Hawai’i has a particularly stringent standard for dismissal of actions: that a complaint should not be dismissed unless it appears beyond a doubt that the plaintiff can prove no set of facts in support of his or her claim that would entitle him or her to relief. Case law from the Supreme Court of Hawai’i has held that a mortgagee who elects to proceed with a nonjudicial foreclosure under 667-5 must comply with that Statute, and that holding a nonjudicial foreclosure sale where the sale was invalid under 667-5 results in the sale sale being void. As HRS 667-5 has no “statute of limitations”, any prior foreclosure which did not comply with the Statute is potentially void regardless of when it occurred.

Jeff Barnes, Esq.,